Nowadays, there is no need to be a large pharmaceutical or aerospace company with heavy R&D activity to claim the R&D Tax Credit. Recent regulations have eased the qualification process, allowing startups to immediately benefit from the valuable tax incentive. Under the PATH Act (Protecting Americans from Tax Hikes Act),…
Startups Rejoice! R&D credits now offset payroll taxes: Historically, startups that were not paying federal income taxes could claim R&D Tax Credits, but would need to carry them forward on their corporate and/or shareholder returns until they could offset their income tax liabilities (aka until they were profitable in the…
The IRS defines Qualified Research Expenses (QREs) as the sum of “in-house research expenses” and “contract research expenses”. Those in-house research expenses include Wages: Taxable or subject to self-employment tax of individuals performing, directly supervising or supporting the qualified research. Supplies: Amount paid or incurred for materials used in the…
To qualify for the R&D Tax Credit an activity must meet all four criteria of the “Four-Part Test”. The IRS Four-Part Test requires: a new or improved business component (product, process, technique, invention, formula or software), the business component to be technological in nature, some kind of elimination of uncertainty,…